Interbank rates have surged in Nigeria’s money market, highlighting a deepening liquidity crunch in the financial system. Short-term benchmark interest rates have continued their upward trend as banks scramble to meet their daily funding requirements......Read The Full Article>>.....Read The Full Article>>
This week, the banking system has faced significant liquidity pressures, compelling local lenders to borrow from the Central Bank of Nigeria’s (CBN) standing lending facility at elevated interest rates. The facility rate has recently been adjusted to exceed 32%, further straining banks with limited liquidity, particularly tier-2 institutions.
Market analysts noted that short-term benchmark interest rates often serve as a guide for pricing money market deposits. On Tuesday, interbank rates rose sharply following substantial Open Market Operations (OMO) auction settlements that drained liquidity from the system.
Although an inflow of ₦101.80 billion from maturing OMO bills provided some relief, the liquidity deficit was exacerbated by a massive settlement of ₦1.6 trillion for OMO bills auctioned by the CBN on Monday. This liquidity drain impacted the Nigerian Interbank Offered Rate (NIBOR), which declined across most maturities except for the overnight NIBOR, reflecting the financial system’s constrained liquidity.
According to Cowry Asset Limited, the OMO auction settlement debit of ₦1.559 trillion prompted the market to adjust both the open repo and overnight lending rates. Data from the FMDQ platform showed the overnight policy rate (OPR) rising by 0.68% to 32.07% and the overnight lending rate (O/N) increasing by 0.82% to 32.82%.
